Palestine and European Union embroiled in financial scandal

The European Union (EU) has become embroiled in a financial scandal of massive proportions in relation to the financial assistance given by it to the Palestinian Authority (PA) since 1994.

This appears very clear from the comprehensive European Court of Auditors Report dated 22 October 2013 which was only made public this week.

The Report reveals the following:

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Spending hundreds of millions of dollars supposedly supporting the salaries of public servants that no longer occupy those positions and doing nothing to arrest this expenditure - although knowing it was happening - indicates an appalling standard of financial irresponsibility for which the EU has become famous.

This financial gravy train seems set to continue whilst:

The European Union is on a treadmill from which it must now extricate itself.

The obvious solution is to make sure EU money gets to the most needy – not phantom employees who have been having a financial feast at European taxpayers expense.

During the period 1994–2006, more than 2.7 bil­lion euro was allocated to the Palestinian Authority from the EU's general budget.

Between 2007 and 2012 some 2.9 billion euro was committed from the EU general budget. The main focus of EU assistance involved direct financial support (DFS) - which accounted for 47.4 % of the overall assistance in the period 2007–12.

DFS was the EU's response to the political, fis­cal and humanitarian crisis that followed the temporary suspension of most aid to the PA following Hamas' January 2006 election victory. A 'temporary international mechanism' (TIM) was established which aimed to ensure the direct delivery of assistance to the Palestinian population while bypassing a Hamasâ€'led government. TIM - initially set up for 3 months - operated between June 2006 and February 2008 - until replaced by the current mechanism – PEGASE - which is largely based on TIM

PEGASE DFS has had the broad objective of helping the PA continue to function until the overall political objective of a two state solution is achieved.

The main objective of PEGASE DFS is to help the PA to meet its obligations towards civil service employees and pensioners (CSP) and maintain the functioning of the administration and the provision of essential public services to the population;

Support for civil servants and pensioners comprised 72.5 % of total funding.

Since the launch of PEGASE DFS in February 2008, few substantial changes have been made to the CSP component. This is in spite of changes in the operational environment, including the increasing number of beneficiaries, the rise in the number of civil servants not attending work after public sector strikes in Gaza in August–September 2008 and the growing need for civil service reform.

The EU has not developed a clear strategy on how to reduce the PA's dependency on PEGASE DFS support over time.

From 2008 to 2012, the average number of civil servants and pensioners that regularly had part of their salary paid by contributions from the CSP component rose from 75 502 to 84 320. This represents approximately half of the PA's 170 000 civil servants and pensioners.

The PA has made little progress on civil service and pension reforms to reduce the fiscal impact of the increasing numbers of staff and pensioners, for example, by reducing the number of PA staff or amending the rules regulating entitlements.

The audit found indications that in Gaza a considerable number of civil servants were receiving salaries - partly funded by PEGASE DFS - because they were eligible for support by virtue of being on the PA payroll but who were not going to work due to the political situation in Gaza. Some civil servants were dismissed after the Hamas takeover because they supported the PA, while others were demoted or locked out following the PA trade union strikes of August– September 2008.

Out of 10 Gaza beneficiaries selected by the audit for interviews, three stated that they were not working, while one was absent. The audit also found that the State Audit and Administra­tive Control Bureau was obliged, in accordance with PA regulations, to pay salaries for its 90 staff members in Gaza, all of whom are unable to work. These findings are consistent with estimates based on data from interviews provided in a 2010 evaluation of PEGASE contracted by the EU which indicated that 22 % and 24 % respectively of the staff employed by the PA Ministries of Health and Education in Gaza were not working at the time.

The EU while aware of this problem, has not taken adequate steps to address it and was unable to provide clear information on the extent of this practice. Given the amount of money which the EU is providing through PEGASE DFS, it would have been ex­pected that they could obtain such information from the PA.

Despite the importance of this issue, there was no transparent reference to PEGASE DFS being used to pay non-performing workers in any of the EU's financing documentation for the annual programmes.

While PEGASE is intended to support public services for the benefit of the Palestinian population, the payment of non-performing civil servants does not serve this objective.

Spending hundreds of millions of dollars supposedly supporting the salaries of public servants that no longer occupy those positions and doing nothing to arrest this expenditure - although knowing it was happening - indicates an appalling standard of financial irresponsibility for which the EU has become famous.

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This financial gravy train seems set to continue whilst:

Hamas and the PLO refuse to reconcile their differences.

The PLO rejects any kind of settlement with Israel that entails Israel obtaining sovereignty in any part of the West Bank.

The European Union is on a treadmill from which it must now extricate itself.

The obvious solution is to make sure EU money gets to the most needy – not phantom employees who have been having a financial feast at European taxpayers expense.

About the Author

David Singer is an Australian Lawyer, a Foundation Member of the International Analyst Network and Convenor of Jordan is Palestine International - an organisation calling for sovereignty of the West Bank and Gaza to be allocated between Israel and Jordan as the two successor States to the Mandate for Palestine. Previous articles written by him can be found at www.jordanispalestine.blogspot.com.